The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to full and timely payment, linked to efforts by official creditors to close an emerging financing gap in Greece. This financing gap has emerged in part because Greece’s access to market financing in 2012 and possibly beyond, as envisaged in the current official EU/IMF program, is unlikely to materialize.

This lack of access, in our view, creates a gap between committed official financing and Greece’s projected financing requirements. Greece has heavy near-term financing requirements, with approximately EUR95 billion of Greek government debt maturing between now and the end of 2013 along with an additional EUR58 billion maturing in 2014.

Moreover, the downgrade reflects our view that implementation risks associated with the EU/IMF program are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate.

Who could have seen this coming? Aside from a majority of sentient humans?

CCC is one notch above default, FYI. It is now the worst-rated nation in the world by S&P. Only Ecuador is worse on Moody’s rating scale, meanwhile.

Greek CDS continue to widen to record levels. Tracy Alloway wrote this morning at FT Alphaville of the recent craze of shorting Greek CDS while also shorting Greek debt, in the hope that there will be some kind of Greek re-profiling or whaddyacallit that will not trigger the CDS, hurting both bonds and CDS. Maybe people are starting to abandon at least the short-CDS portion of that trade?

Greece’s biggest problem is its banking system, writes Simon Nixon at Heard on the Street